Active management and strong equity markets propelled the State of Wisconsin Investment Board in 2021, according to CIO Edwin Denson.
On Monday, SWIB announced that its $136 billion “core” fund — the larger and more diversified of its two trust funds — generated a net return of 16.9 percent in 2021, surpassing its benchmark target of a 13.3 percent return. In 2020, the core fund had ended the year with a net return of 15.2 percent.
At the end of 2021, the pension fund was fully funded with $147 billion in assets under management, a jump from 2020’s $144 billion.
“Despite the continuing impacts of the pandemic on both our workplace and the markets, the level of collaboration and innovation across the organization and commitment by staff over the past year was both satisfying and impressive,” Denson, SWIB’s executive director and chief investment officer, told Institutional Investor in an email.
SWIB said the core fund’s five- and ten-year returns also surpassed its performance benchmarks, at 12.5 percent and 10.1 percent, respectively. The plan’s long-term investment target for those time periods is a 6.8 percent return.
About half of the core fund, which is focused on long-term investments, is allocated to public equities. The other half is broken up into allocations to other assets like bonds, real estate, fixed income, and private equity.
Denson attributed the fund’s successful year to the plan’s active management and diversified holdings, with equities primarily driving returns.
“It was a very good year all around for equity markets,” Denson said. “The market environment in general provided a very strong tailwind.”
He said the fund’s active strategies added value that surpassed market-generated returns.
“We were able to add value in fixed income, both in investment grade and high yield corporate bonds, despite the general rise in interest rates that was realized early in 2021,” Denson said. “We also were able to add value in public equity, in the small-cap and emerging markets segments.”
SWIB’s hedge fund investments and private equity and real estate portfolios also delivered strong performance, Denson said.
In 2022, SWIB’s asset allocation targets for its core fund include a 52 percent allocation to public equities, a 25 percent allocation to public fixed income, a 19 percent allocation to inflation-sensitive asset classes, a 12 percent allocation to private equity and debt, and a 9 percent allocation to real estate.